Living Trusts – What about your Other Documents?

By: Martin M. Shenkman, CPA, MBA, JD

Introduction/Overview: Lots of
folks believe living trusts (also called revocable living trusts or loving
trusts) are the cornerstone of their estate plan. There is no question that properly
done living trusts are a great planning tool, but do you still need other
documents? What is the relationship of other documents to your living
trust?

√ Question: What about beneficiary designations?

√ Answer: The
beneficiary of your life insurance, IRA, annuity and so forth, will receive
those assets directly upon death so that they generally will not name your
revocable trust. If your objective was avoiding probate, that is already done
by the beneficiary designation. However, if you want the money in a trust, you
have to consider naming your trust as a beneficiary. But, talk to your CPA, there
could be tax problems.

√ Question: What about a will?

√ Answer: Most
people with living trusts use a "pour over" will - it pours any assets not in the
trust into it at death. You still need a will to appoint guardians for minor
children and deal with assets not in your trust. Be cautious that having a "pour
over" will doesn't mean you shouldn't bother transferring assets to your
revocable trust to get the benefits your trust provides if you are disabled.
You're better off funding it.

√ Question: What about living wills and health proxies?

√ Answer: These
documents are always needed. The trustee can use trust money to pay for care,
but cannot make medical decisions.

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